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Without plan, no negotiations with creditors

By on November 18, 2016

FAJARDO, Puerto Rico — Until a long-term fiscal plan for Puerto Rico is certified, the fiscal control board won’t make way for negotiations with creditors, including any interim financing agreement that could be reached in the coming months.

“The first step is to have a certified fiscal plan. The second step is to negotiate with creditors. There are no negotiations until there is a certified plan,” Ana Matosantos said during a press conference after the Financial Oversight & Management Board’s meeting Friday.

The board’s members didn’t indicate whether they favor an extension to the stay on litigation set by Promesa and asked for room to work on the plan’s certification before Jan. 31, the date they established for approval.

“We are inclined to work on having, as soon as possible, a fiscal plan that can be certified. That is the No. 1 priority and requirement to reach any of the other steps in the federal law,” the board member added.

Asked by Caribbean Business about the urgency outgoing Gov. Alejandro García Padilla has given starting to restructure the debt under Title III of Promesa, oversight board Chairman José Carrión III said: “The [stay] moratorium is [until] Feb. 15…. Although there isn’t a lot of time, we believe we can hold preliminary discussions with people who have an interest in restructuring, that it be in process, and comply with the statute.”

Fiscal oversight board Chairman José Carrión III and board member Ana Matosantos

Fiscal oversight board Chairman José Carrión III and board member Ana Matosantos

Over the past few weeks, the outgoing administration has raised its voice, alerting about the government’s liquidity situation, which will be exacerbated in February once the moratorium period ends and the government fails to service its debt. Given that scenario, the government of Puerto Rico would face more than $1.3 billion in outstanding debt payments, for which it would have almost $100 million in cash, according to projections by the outgoing administration.

Therefore, García Padilla assures the only real option would be Title III. Under that provision, after certifying the long-term fiscal plan, the board could file a case in federal court for the debt restructuring process to be carried out under the auspices of said forum.

Meanwhile, when asked about a possible interim financing agreement, which Gov.- elect Ricardo Rosselló is interested in pursuing, Matosantos stressed that the board “must have a certified fiscal plan, and then we will have to see what the next step is.”

During its third official meeting, the board pointed out several changes and revisions that should be made to the fiscal plan, including using projections under current law and not contemplating additional action by the federal government, such as the extension of healthcare funds and the foreign corporation excise tax under Act 154.

The outgoing administration will have to present a new draft of the plan by Dec. 15, which will be discussed during a fiscal board meeting slated for Jan. 16.

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